Can Zynga’s move into gambling revive its fortunes?
Only a few years ago, Zynga was one of the fastest-growing companies in the world, bringing in large amounts of revenue from Facebook users who were playing popular games Farmville and Cityville.
Players could sell “virtual goods” for real-world money and whilst Zynga’s popularity and business rose at an in incredible rate, inevitably a fall was to follow.
Zynga made C$574.6m from selling virtual goods in its online games which dwarfed the C$22.8m it generated from advertising. At the time analysts feared that Facebook was over-dependent on Zynga as it was drawing many users onto the social network platform.
However the Zynga boom did not last and at the end of 2011 it dropped below its opening price of C$11 a share. A year later it collapsed to below C$3 and last November it dropped further to C$2.09.
Insiders have claimed that Zynga became obsessed with copying rivals’ best-selling games, rather than developing its own ideas. One former employee said “It needs to ignore whatever is currently hot and try to make something new” if it attempts to recover.
Rather than attempting to duplicate popular games, Zynga has hailed mobile as “the next frontier in social gaming” and promised better connected games to come into the fore. The focus on mobile will reduce the company’s reliance on Facebook – a concern that affected many investors in the past. Zynga has made a conscious decision to move away from the Facebook market and the typical casual gamer.
Instead they are focusing on traditional computer game players, as well as the gambling market. This is a big departure from their old ethos of social gaming, and from their cash cow.
Last year they signed a deal with bwin.party and launched Britain’s Zynga Plus Casino and Zynga Plus Poker. As opposed to creating a virtual life in a virtual casino, customers can bet real-world cash on casino style games with the prospect of winning real money. Chief Financial Officer Dave Wehner said it was “only a first step to what is a large opportunity.”
With the popularity of online gambling and traditional gaming growing, not only was this a good move for Zynga to attract a wider gaming audience, but it also appealed more to investors who were looking for something more tangible. However, with the popularity and revenue of Zynga going through peaks and troughs, they’ll have to wait and see if the move into gambling will be its saving grace.